Part I — Statistics Show Hospitals Cutting Services, Damaged by Post-QIC Recoupment

The situation at OMHA continues to deteriorate. The backlog in appeals continues to explode, and different options are being considered to solve the problem. In Part I we will examine the statistics behind the backlog. In Part II we will examine the proposal to add a new role for Attorney Adjudicators (AAs) who can take over part of the Administrative Law Judge’s (ALJ) work during the appeals process. In Part III we will examine the proposal for bulk settlements based on a simple percentage of claims, but with no review of the claims themselves — the “Eighty Percent Rule”. In Part IV we will examine financial strategies being used by Hospitals to handle the massive impounding of their claim payments.

Figure 1 The number of Medicare Appeals has increased so much that the entire system is frozen.

The recent ruling in American Hospital Association v. Burwell (*) keeps up the pressure on OMHA to dig out of the backlog. In the ruling, we see that the exploding backlog is “especially harmful to hospitals because HHS recoups funds after the QIC stage” under 42 U.S.C. § 1395ddd(f)(2)(A). This is the time gap in the appeals process preceding the hearing with the ALJ. The essence of the backlog problem is that this time gap plus the time when an ALJ decision finally is rendered is rapidly increasing. The prospect for any hospital to get their money is running away into the distant future, thus draining the cash reserves of the hospital or leaving its banking account empty.

For hospitals that have a large share of patients relying on Medicare, this seizure of funds is particularly damaging. Some are faced with decisions to suspend some services, or even defer maintenance on physical plant. One hospital reported the inability to repair a leaking roof covering its ER facility.

In 2011, 59,600 appeals were filed. In 2013, the number had shot up to 384,000 appeals. The RAC program is responsible for 46% of these appeals.

Hospitals frequently appeal because statistics show there is a reasonable chance of success in turning around claim denials made by over-zealous auditors. These are denials that never should have been made in the first place. For example, hospitals appeal around 52% of RAC denials, and hospitals win around 66% of the time. That amounts to a good chunk of change.

OMHA does not have the capacity to handle this case load. It can process only around 72,000 appeals per year, which is less than one-fifth of the needed capacity. As of July 2014, the backlog had risen to over 800,000 appeals.

Just as a reminder, here are a few of the deadlines: Redetermination by MACS – 60 days (42 U.S.C. § 1395ff(a)(3)(C)(ii)); Reconsideration by QICs – 60 days (§ 1395ff(c)(3)(C)(i)); Hold hearing and render a decision by ALJ – 90 days (§ 1395ff(d)(1)(A); Review by DAB and decision or remand – 90 days (§ 1395ff(d)(2)(A)). This adds up to 10 months.

Simple math shows that at this rate, appeals easily could take more than 130 months to resolve. In simple terms, the amount of time to resolve claims is at least thirteen times greater than required by the statutory framework.

OMHA long ago went into “crisis mode”. Back in 2013, the Chief ALJ of OMHA notified hospitals that it was “temporarily suspending appeals to ALJ dockets” and that this suspension would last “at least 24 months”.

That is like saying “I would love to pay you back, but you have to wait at least two years for me to think about it again”.

In summary we can say: Medicare Appeals Backlog. The number of Medicare Appeals increased more than 900%. Statutory time for appeals has been exceeded. Backlog more than 10 years. No solution in sight.

In Part II we will examine proposals published in the Federal Register (**) to off-load some of the appeal work onto a new class of administrative lawyers to be called “Attorney Adjudicators” (AAs). In Part III we will examine the proposed “80% rule”, and in Part IV we will look at emerging financial bridge strategies being used by hospitals.